The Prime Minister of Vietnam last week approved the plan to merge the Hanoi (HNX) and Ho Chi Minh (HOSE) Stock Exchanges. This merger will increase the overall market size which should help increase the level of foreign investor participation. However it should be remembered that in the realm of stock markets Vietnam is still considered a frontier market as opposed to an emerging market.

Hose was launched in July 2000 and the index has hit lows of 300 plus and highs of a 1000 plus but has stabilized in a trading range of 500-600 over the last 2 years. The HOSE currently accounts for over 80% of the combined market capitalization of over US$ 50 billion at the end of 2015.

It is planned to launch a comprehensive VNX all share index in October 2016, which will consist of 208 stocks on the HOSE and 180 on the HNX. This index will be the first move to merge the two exchanges and create a unified Vietnamese Stock Exchange.

The combined index will be stronger than the current separated indexes and should help attract larger institutional investors from overseas. However, this does not remove the need to address higher levels of financial reporting, transparency and corporate governance which will be the bigger attraction to foreign investors.